The effects of mergers and acquisitions
It’s been almost 30 years since IBM rattled the South Florida economy with the announcement that it was closing its Boca Raton facility and consolidating operations in Austin and North Carolina. With that announcement came an end to thousands of careers for those who opted not to re-locate.
Today, we’re seeing a similar situation with the acquisition of Office Depot by Staples. While the number of jobs is not as large, the impact on individuals is significant. It doesn’t appear that many of the 1,700 employees in South Florida will keep their jobs since the “new” Staples will keep its corporate headquarters in Framingham, MA.
For the families affected, it doesn’t do much good to explain that this move is all about creating shareholder value in a retail industry that faces diminishing returns. Likewise, in today’s M&A environment, it doesn’t make sense to talk about employee loyalty. Bottom line is that it’s a tough situation for the affected families as they begin to evaluate their next professional moves.
There are several dynamics that come into play when employees and corporate leadership brace for the change that will happen in the wake of an acquisition or merger. The Office Depot/Staples situation is one in a long line of similar scenarios that we have seen during many years. How this plays out is all a function of how senior-level leadership responds to the challenge. For example:
- What type of severance package will be offered and to whom?
- How does leadership maintain corporate productivity with a workforce that is worried and has low morale?
- How does leadership respond to questions that can’t immediately be answered?
These are all difficult issues, and it’s tough on all of the audiences that are affected by a merger or acquisition. The bottom line is that “leaders lead” and this starts with candid, frequent communication regarding the situation. This starts with the recognition that most of the employees are going through the classic stages of mourning – anger, denial, bargaining, depression, and acceptance.
There’s no question that these leaders will earn their keep by having to motivate an emotionally distressed workforce and satisfying the brass of the acquiring company. It is a balance that must be maintained. But we shouldn’t necessarily feel sorry for senior management charged with structuring and leading what can be traumatic for many employees. After all, it’s likely those on the C-level will get a huge “parachute” for successfully completing the acquisition.
Current management must maintain its credibility through this trying time. This starts with effective, frequent, and accurate communications. Every situation is different and there’s no magic formula. One critical piece of advice is that management can’t contribute to false expectations. If people will lose their jobs, tell them and, if possible, give them a timetable. Management should also:
- Provide practical services – outplacement counseling
- Detail severance packages in terms of salaries and benefits
- Be transparent in terms of opportunities that may be available in Massachusetts or Florida
- Be accessible and empathetic through face-to-face meetings and written communications
- Develop a compensation strategy that motivates employees to finish strong. This frequently involves a “retention” bonus. For example, if employees finish out a pre-determined time period and meet job expectations they will receive a bonus in addition to their salaries.
Mergers and acquisitions put a strain on local economies and residents. There’s no way to sugar-coat the situation. People will lose jobs and communities lose a strong corporate presence. Leadership, however, can make it easier through credible, accurate communications and by implementing a plan that enhances shareholder value while not leaving a bad taste within their communities.